[MUSIC PLAYING - PROTEST SONG]
NOMI PRINS: So the imagery in that is sort of a walk through,
to an extent, the parts of the world
that I was in in the putting together of this book.
And those parts of the world were also historical,
as well as geographical.
The last book I wrote, "All the President's Bankers,"
was very much historical.
It went through the last century and a bit of the relationship
of presidents in both parties and the bankers,
and just what the actual personal relationships were
and how they were interacting before various types of world
events-- wars, policies, and so forth.
And this was kind of that, but from just the 10
years since the financial crisis of 2008.
And then rather going back to the history of one country,
I sort of expanded it to what's happened globally
since the financial crisis.
And to get to the punch line first--
because I also want you to feel like you
can interrupt me and ask questions.
I know I'm here to speak to you, but you're
a very informed group.
And so I think that if I say something that's
either troubling, or confusing, or you want me to expand,
or whatever it might be, just shout out,
because I think that that will be a good thing.
But anyway, so I divide my book into the regions
of the world that were either involved, or affected,
or impacted by the financial crisis and then
how they've acted differently since then.
And I talk about collusion.
It's not about Russia.
It's not about politics--
well, everything is ultimately about money and politics,
but that's not the point of the book.
The point of the book is to look at what the main central banks
in the world have done, in an unprecedented way since
the financial crisis, to artificially stimulate
the financial system-- the banks and subsequently the markets--
in a way that's been very historically epic
in terms of size, but also in terms
of just their unlimited capabilities,
in terms of the amounts that they've
created, in terms of no auditing, no information going
in and out as to where that money actually goes.
And so what I did was, I didn't have a chapter on the Federal
Reserve, which I'll talk about a bit more
in a second, which is kind of the central character.
If we look at central banks as just characters
throughout the world, and the individuals that run them
as just the characters that are part of those scenes,
I took 2008 as the beginning of each chapter and each region.
And I always started there and then looked
at how that region was impacted.
So I go to Mexico, to Brazil, to China, to Japan,
and throughout Europe.
And each time, I go back to the beginning and say, OK, well,
this is the perspective of what happened
between the Federal Reserve of the United States
and this area.
And this is how the fallout occurred.
Or this is how they expanded, but not really.
And my general theme is that having
had an unprecedented amount of money being thrown
into the system, fabricated or manufactured or conjured
by the central banks, has really distorted the idea of value.
It's even distorted the idea of how
companies who actually show their profits and losses based
on actual cash, actual revenues and so forth, that aren't
artificially stimulated by money coming in
from an outside source are operating
in a world in which there are also ones that are.
And so in terms of just the graph of that--
I wasn't, again, going to do slides, because I tend to--
I can just write on this.
So the way that looks--
and if anyone wants me to just mention
what a central bank is while I'm making sure these write--
does everybody know what a central bank is?
So basically, a central bank-- and the Fed, in particular,
was usually designed to provide emergency capital in the event
that the financial system can't produce it for itself.
It's going to create a bigger crisis
for the rest of the economy.
There needs to be a particular reaction to, say,
a war, or interplanetary aliens coming, or something like that.
And the reality is that they have clauses in their mandates
that are emergency clauses to be able to do this.
So it's all quite legal.
And I'm not advocating that the collusion of central banks
is something that's illegal--
I do get asked that question-- but it
is something that's, to an extent,
deceitful because, by having a large supply
of artificial money that has no limitation in terms
of when and how it can be fabricated,
as it has been the last 10 years, that distortion thing
does create a level of deceit.
So one of the things that happened
since the financial crisis--
I'm bad at drawing, but I'm just going to-- this is 2008,
and this is now.
And I have this on my Twitter, this particular graph.
But I thought it was cool, because it was three lines.
One was the Federal Reserve and how much money and when
it dumped it into the system.
One is the Bank of Japan.
And one is the European Central Bank.
Because the idea of this collusion is that
the major-country central banks have also adopted a cheap money
policy and a quantitative easing,
or buying securities policy--
buying bonds, buying ETFs, or buying stocks
if you're in Japan, buying corporate bonds if you're
where they've been able to fabricate money and decide
where, effectively, they want to invest it.
But they go through a financial system that
has an impact on the market.
So the Fed kind of started this in 2008.
And they did some sort of a taper,
in terms of-- this line represents the amount of money
they conjured since the 2008 period to buy--
in the case of the United States--
Treasury bonds, government bonds,
and mortgage bonds from the banking system.
And so this is 2015.
This isn't really-- it's a tiny line down.
Though they haven't continued here,
they have a pretty high value--
$4.5 trillion of what I consider to be subsidies for the banking
system in the market because they're really coming out
of the electronic activities of the Fed.
So this is the Fed line.
Colors don't mean anything, by the way.
I'm just randomly picking colors.
Then the European Central Bank came in
and did something similar, except that they
were kind of here.
And then they kind of did that.
So this is the European Central Bank.
This is 2012 where--
my bad geometrics is such that they kind of accelerated
their process of being involved in quantitative easing
by a lot when there was a credit crisis in Europe.
So the minute there wasn't enough money in Europe--
they thought they had recovered, they really hadn't, they
were still adopting the policy of colluding with the Fed
to produce money in the system--
And in this period of time where the Fed
stopped putting as much in, they accelerated even further.
So now they're around that $5.5 trillion.
And then the Bank of Japan--
which was the bank that actually created quantitative easing
to begin with-- they came up in 2001 with this idea
that if they produced money into the system,
because their banks were basically undergoing
a collapse in the beginning of the 2000s,
that they would have a way to help them.
And they did produce money.
They did engage in quantitative easing,
but it was really, really tiny.
So I talk about, in my Japan chapter,
how Ben Bernanke, who was the chair of the Fed
when all this kind of started, goes in front of Congress
and talks about how what we're doing
is not what the Japanese are doing.
It's really different.
We're doing it for other purposes.
But the reality is that the mechanism's the same.
They're producing money in order to increase the money supply,
in order to then decide where it goes--
into the banking system, into corporations
who then borrow it, which then goes into the stock market
or other financial assets.
So the Bank of Japan was kind of also here.
And then in about 2013, they did that.
So they're around $5 trillion right now.
And basically, the reason they had an acceleration
in about 2013, 2014 is because, from an economic perspective,
having watched all of this happen,
the prime minister, the head of Japan, Shinzo Abe,
decided that we should be doing the same thing,
or doing more so of that in Japan.
And so the head of the central bank now in Japan, Kuroda--
this is Mario Draghi.
Currently, this now at the Fed, through a different period.
It says Jerome Powell, but there's
been three different Fed heads, two different Japanese heads,
and two different European heads over this time period.
They've all engaged in the same process.
And as a result, there's about--
well, this is $15 trillion.
But when you aggregate all of these numbers
and you aggregate all this graph,
the level of money that's continuing
to be conjured and dumped into the system is going up.
So when you hear in the news that the Fed is tapering,
that they're doing this, and this somehow
is a reflection of their experiment
in quantitative easing and cheap money succeeding,
you have to understand-- and this is the collusive efforts
involved-- that collectively, the world is
increasing their amount of quantitative easing.
It's just happening in different countries
for different reasons.
And in the European Central Bank realm,
it's being dumped into corporates, for the most part.
And in Japan, it's a combination of government bonds and stocks.
And in the US, it's kind of stopped.
But it was a combination of government bonds and mortgage
So it was always going into the place that
needed the most help, but the, say, corporations
in Europe that needed that help were receiving it basically
without giving very much in return.
The European Central Bank would decide, well,
we're going to give money to this particular company
in Germany, versus these particular companies in Greece.
And that was, in a lot of ways, a political decision.
But the monetary elements of that
enabled certain countries, and certain companies,
and certain stocks to go higher simply
because there was an outside artificial source
to push things higher.
And so when I started going around the world and examining
what the real actors were doing throughout this period--
this is just kind of the summary, and the summary,
again, looks like this, from a half a trillion--
there's a picture that starts to be developed.
And that's that the ones that had the ability
to produce money did.
Their markets have risen more substantially.
There has been more speculation outside
of those markets because, once they go up,
where else do you go?
Capital flows out.
It goes to Mexico.
It goes to Brazil and so forth.
But in those kinds of countries, there is less of an ability,
and they didn't choose, necessarily,
to get involved in quantitative easing.
So there was an entire political ramification
that doesn't really get discussed,
behind just the value of money and the amount
of quantitative easing that these major central banks are
doing that actually has changed the shape of the world.
So the first country I go to in collusion is actually Mexico.
And the reason I did that is because I
spent a lot of time working with companies in Mexico and stuff.
But basically, the Mexican government and the individuals
who were really involved in the period
from 2008 to 2018 that were running
the central bank in Mexico had real strong opinions
about what the Fed was doing.
And a lot of countries had strong opinions
about what the Fed was doing because, to an extent,
it's just not fair.
It's not really capitalism.
It's not really free markets.
It's kind of like a subsidy for the financial system
that then has major ramifications of creating
an artificial system.
And that can go terribly wrong very quickly
if it gets taken away, which is why it's not being taken away.
And there's ramifications to that.
So what Mexico decided in 2008-- and their economy
was actually doing fine.
The crisis happens north of the border.
In the beginning, they say, well, it doesn't really
It's a financial crisis.
It's contained in the banks.
The Fed's taking care of it.
But then it starts to become apparent very, very quickly
that that's not the case, that if there's
a recession in the States, or if there's
a depression in the States, or if the financing closes up
and there's no credit going throughout the system,
it impacts everyone.
So the head of the central bank of Mexico, a guy
named Guillermo Ortiz, he went to Washington.
He was part of the establishment.
He sort of floated in the economic ideas of the Fed
governors and so forth.
He goes up to Washington, and he says to Ben Bernanke, look,
we've seen this movie.
We know how it ends.
It doesn't end well.
We had the tequila crisis in '94.
We restructured our banking system.
Smaller banks got eaten up.
People got thrown out of jobs.
It took us a really long time to recover.
And more than just the economic problems of recovery,
our people lost confidence in the system.
And there, that manifested in lots of crowds in the streets.
But the point was, if you simply create money
to simply help the financial system, to help the banks,
it's not really stable capital.
It's not really ultimately going to work.
There will be bubbles.
There will be problems.
And Ben Bernanke says, thanks, doesn't
cover Ortiz and his memoirs at all,
even though this meeting was covered by "The Wall Street
It was public.
And he basically goes about in manufacturing this emergency
quantitative easing amount, and then has the whole world
Why does the whole world join in?
Or why do the major countries join in
to any quantitative easing movement?
Because if you have capital in the US--
and money is made very cheap so it's
more liquid to the financial system
so they can sort out the stuff they did--
and rates are higher elsewhere, in particular,
in the main countries with which there is trade,
or with which the banks have relationships,
then the money is going to leave.
And so the only way to keep the dollar strong enough
and keep the money in the US is to export the same method
to the countries that have the largest relationships.
So something like Mexico has to also deal with its own economy.
So if it reduces rates by too much,
that will cause inflation in the economy,
because it has a more direct impact on actual people
and on actual prices, because it's a smaller economy
to begin with, and it's reliant on other economies
for its trade by more so.
So Ortiz didn't want to reduce rates,
like the Fed was doing, very quickly.
And they couldn't produce money electronically to buy
securities in Mexico-- they didn't have the same capacity--
and so they didn't.
So he didn't.
He went about criticizing the US.
As a result, he lost his job--
or he didn't get reappointed to be the head
of the central bank of Mexico.
And the subsequent appointee, a man
named Agustin Carstens, who also was in the same group
as the people running the Fed, Treasury Department, and so
forth, came in.
And he at first said, OK, I'll do what the Fed's going to do.
I'll reduce rates.
I'll keep it sort of stable between the border of Mexico
and the US.
I'll follow along.
He used to go public about the fact
that this easing was going to help
the real economy-- ultimately will trickle out of the banking
system and out of the markets, and it
will help real growth and long-term growth
and wages and everything else.
And that's what he said originally.
That's how he got that job and had that job
for a while in this period.
But the reality was they didn't do that.
And he started feeling the political pressure
in Mexico of the fact that Mexico wasn't really getting
any of this money into their economy.
And it was very, very obvious.
And so he started criticizing the Fed and everything else.
And he ultimately resigned before the end of his term,
And he's now the head of the Bank
of International Settlements, which
is the central bank of central banks
that does reporting on all of these activities
and always used to support the Fed, the IMF, the World
Bank, the ECB when it came into being, as doing
the right thing by their economies,
by employment versus inflation, which is one of their mandates,
by helping their system.
And it was created, basically, as a unified US-Europe entity
to begin with.
It's starting to have real critiques.
And the fact that it is now run by someone who bought,
then kind of sold, the policy of the United States
and is now at the head of that institution
really shows a shift in general in the world in terms
of how it looks at what the end game of this could be,
how risky it could be for the rest of the world,
and is just simply questioning how long this can go on.
So that's been one shift.
Another shift-- it's a longer story; I won't get into it--
is in Brazil, because that has so many
of its own pieces of corruption, and scandals, and government
overthrows, and so forth.
But one of the people who's currently
running for the presidency of Brazil
is a man named Henrique Meirelles.
I pronounced it "Meireyes," because for some reason,
my Portuguese is very bad.
I was corrected last night, actually, in Berkeley,
about my pronunciation of his name.
But he was someone who was head of the central bank of Brazil
when this all started, when the crisis all started happening.
And he and the president of Brazil at the time, Lula,
who's now in jail, was at first saying,
Brazil's not going to be impacted
by the crisis, same way Mexico said it wasn't going to be,
until they were very shortly thereafter.
And he wanted to do what the US was doing.
The party in power, who became in power, the Workers'
Party, headed by a woman named Dilma Rousseff,
said no, we want to maintain help for Brazil.
He says, we want to do what the US-- so he loses.
He doesn't get appointed to be the central bank leader.
And he goes back into the private sector.
He winds up being the minister of finance when
her government was overthrown.
And so he's basically gone from being a central banker,
to private sector, to being a minister of finance.
And now he's running for president.
In the meantime, Brazil, during that period--
and this is just where politics meets monetary policy--
has basically reduced its rates from--
this is a completely separate graph,
this doesn't count on that graph--
reduced their rates from 14.5% to 6.5%
in a very short period of time.
Mexico has raised its rates from 3.5% to 7.5%
in the last few years as well.
So they've gone independent of the Fed.
They've gone sort of dependent on the Fed.
And that really manifests into political relationships.
If you're an investor, it actually
also manifests into figuring out why this has happened,
because it's very unique that, actually, Mexico
has higher rates than Brazil.
So there was a lot of shakeout, as well, from a monetary policy
perspective, where government bonds are trading,
where stocks are trading, and who's
shifting in the power relationships of central banks
and also the governments.
Now, central banks are supposed to be
independent of governments.
That's how they are mandated.
So supposedly, the Federal Reserve
is independent of whatever the US government wants to do.
The Bank of Japan is independent.
And I went through a lot of documentation.
I had this team of researchers around the world
who knew languages that I didn't know.
And so we were looking at real media publications
at the time, real documents and research information that
was coming from these central banks themselves.
And it was interesting, because there
was a lot of both criticism of what
was happening on the outside and trying to figure out
if they should adopt it on the inside, which
is part of where there's a lot of tension
and still tension in the world.
But China, which is the middle of the book,
is a place that has grown in its "superpowerness",
from an economic perspective, and also its relationships
with other countries.
And one of the reasons it doesn't get talked about
is that it chose to criticize, very
vocally, the monetary policy of the United States because
of this whole creation of money policy.
Now, it has created money as well,
but it chooses to do it outside of the main G7 groups.
And it does it for different purposes.
And you probably know this here--
it does it for building infrastructure,
for paying for technology, and R&D, and individuals, and also
for trade alliances with other countries in that region,
with Mexico, with Brazil, in order to establish itself
as a sort of more--
both from a trade perspective and a monetary perspective--
The reason that all started to happen in 2008, 2009
is because the head of the central bank in China,
at the People's Bank of China, got very public
with his criticism of the Fed.
Ultimately, the Chinese currency, the ren,
was accepted into the IMF's special drawing rights
basket, which is the representation
of the main currencies.
It had always been the dollar and the euro--
which had before that been the German mark
and the French franc--
and the Japanese yen and the British pound.
And in this period of time, the Chinese currency, the ren,
became part of this basket, because even the IMF that
had been established to really work on the reserve
currencies of the dollar and the euro, mainly,
was beginning to criticize whether all this money being
dumped in the system, when it is retracted, or when rates rise,
or when something goes wrong with all the debt that's
been created on the back of it, causes problems
throughout the developing world, causes problems within the US.
So they've been very critical of late as well.
But China's been able to utilize that
in order to really become and create
more trade agreements, and more currency arrangements,
and also develop their alliances and their own companies
That's what they've been doing with that money.
We really haven't been.
We've been-- just as a sort of super power--
this money has predominantly gone
into financial speculation, into the markets.
It hasn't been dedicated to building a railway,
or building a canal, or anything like that,
or lending to other countries in order
for them to be able to do that, because they're partners
and that strengthens them, and therefore
the trade relationship.
We've really gone off the rails relative to that.
That's not to say China doesn't have problems,
it's just to say that, in this period of time,
money's been created here, and in Europe, and in Japan,
and to a lesser extent in the UK, for a different reason.
And that reason has been more of a financial reason,
and not so much as a long-term economic stability reason,
as it has in Asia.
I talked a little bit about Europe
in the last chapter of the book.
But one of the things that's come out of the ECB's policy--
aside from the fact that there is criticism from certain
countries, like Germany against the ECB-- because they're like,
our country's fine, we have savers, we're developing,
we don't need this whole easing thing,
we don't want to be concerned about bubbles bursting--
is that the southern part of Europe--
Greece, Italy, Spain, and so forth--
haven't had the benefit of the same amount
of money being put in.
So when there's a lot of money that's
put in in one part of the market,
and it's not divided, or even selected,
or chosen to be put in other parts of the market,
it creates inequalities, and volatility, and instability.
So what we've seen in the last few months,
in even our stock market, is this beginning
of more volatility coming into the market,
more defaults and delinquencies coming
into some of the corporate bonds that
were issued because money was so cheap,
and therefore repaying the debt was so low--
but the debt payments will get higher, and also
money coming out of the stock market
to make debt payments-- and then separately, buybacks,
which keep the level of the market up.
So you have these two competing forces of capital
that are creating more volatility now.
You have cheap money still available.
You have a lot of buybacks-- some from companies that have
cash, and some from companies that have received cash--
And then you also have cracks in the system from both the rumors
that are in the market as to whether or not this can stop.
Any time any of these central bank leaders
talk about the possibility of it stopping,
the markets tend to get really, really upset.
And then the next meeting, there's like, oh,
we didn't really mean it.
There isn't really inflation.
There isn't really growth.
We're going to stop--
which is what he does a lot.
I mean, they all do it.
But it's interesting, because even the Japanese last week had
a meeting, the Bank of Japan.
And they came out and they said, well,
we're going to probably have to keep doing this, like, forever.
They used the term "unlimited."
Mario Draghi said the same thing a week
and a half ago when the European Central Bank came out and said,
yes, we're keeping rates negative.
And we're also going to continue our quantitative easing
So these line up.
The Fed is kind of-- yes?
AUDIENCE: So I just have a question.
Is there really an alternative to printing all this money?
Because if you look at the rate of debt creation
over the past 30, almost 40 years,
debt growth has exceeded GDP growth almost that entire time.
There are projections that so many public pensions will
be insolvent, that there's no mathematical way
to make that possible.
So is unlimited money printing just the easiest way
to kind of softly default on that,
rather than causing some catastrophic collapse?
NOMI PRINS: Well, or having to worry about a solution to it.
I mean, yes, debt has increased over the last 30 or 40
years relative to GDP, but it's accelerated by a lot.
It's increased because it's had this sort of plaster over.
So if the financial system, which kind of
started this in 2008 and was on the brink of what
it said to be collapse, there are different ways
that that could have been addressed.
One way would have been to let one
or two extra banks collapse.
And that really sounded harsh at the time,
but throughout Wall Street, banks have collapsed.
It's not like that hadn't happened.
And the problem was there was so much attention focused on
whether that was going to create a massive depression going
forward that there was no conversation, or very
limited conversation, in Washington
as to doing something else.
You're, I'm sure, very mathy.
The reality-- I'll just go back for one little explanation
of how I saw that--
was, at the time of the 2008 financial crisis,
which was predicated on mortgage bonds, and all the derivatives
associated with them, and all the credit and insurance that
was traded between banks, and all that,
there was only like $0.5 trillion
worth of upset subprime mortgages
in the market at the time, or $0.5 trillion, right?
There was $14 trillion worth of toxic assets,
of assets that were reliant on those subprime mortgages paying
their interest, and if they didn't get paid,
would start to deteriorate in value.
Banks lent to investors around the world,
including pension funds, or helped pension funds,
including municipalities, corporations,
other financial entities, 10 times that.
So $140 trillion, effectively, was on offer,
going after $0.5 trillion of subprime-related assets.
So that problem is what caused an acceleration
of the production of artificial capital
in order to solve what was really
a major financial crisis.
But what could have been done is you
could have just paid off $0.5 trillion
worth of subprime mortgages.
And forget whether that's an ideology of you're
paying people who didn't deserve it, or banks.
It doesn't matter.
The economics of it would have been far, far cheaper.
Instead, the decision was made to plaster
over that and to start this creation of 0%
money so that banks would have the liquidity to start to--
whoever was still left standing-- to repay each other,
so that companies could repay some
of the money they had borrowed, that
were still left standing, that were involved in this.
And as a result, it has created an extra level of capital
in the system that makes debt accelerate.
And it also makes stock levels go up artificially,
so that the next time there is a crisis you're falling
from a much higher height.
So absolutely, they want that not to happen,
which is why every single time a Fed chair says there is growth,
like, you can trade this, I mean,
if you're just even looking at this from an investment
it's going to be followed by some major hiccup
in the market, and then some other central bank, or maybe
the same one, or someone in their country,
saying well, no, we didn't mean it.
The European Central Bank was talking about growth
a minute ago, so was the Bank of England.
They were going to be raising rates.
All these rumors in the market, it put the pound up.
And Brexit's fine.
It's all going to be worked out.
The Central Bank is going to raise rates.
It's a sign of strength.
It's going to help our currency into negotiations with Europe.
There's all these discussions, and media narratives,
and politics going on back and forth.
The reality is they don't have the growth.
And the Central Bank head last week said, by the way,
things aren't so great.
They can raise rates on Thursday, they're not going to,
I think, because actually, the numbers don't bear them out.
And also, it hurt the market.
And so yes, you are right.
Long answer to your question.
But the reality is they want to keep this going.
They found a method to do it.
And that just means that when things crack,
they crack from a much higher height than they would have,
or even did during 2008.
AUDIENCE: So now we have $4.5 trillion
in the market as money supply?
NOMI PRINS: Extra.
And I was wondering, how come inflation
hasn't happened, because all of this money are in the banks?
NOMI PRINS: It's such a good question.
And different people ask that in different settings
for, I think, different reasons.
And I think that inflation has not
risen on the average generic way that inflation
is considered and calculated because this money has inflated
This is inflation.
The level-- well, a third graph would-- well this and the stock
market, so it's dipped a little bit,
but it's sort of like that.
And you have QE1, QE2, QE3, Europe, Japan, and so forth.
Ultimately, this $15 trillion, and $21 trillion
if you add in all the other banks that are involved,
and the market level is pretty much the same.
So there has been a tremendous amount of inflation.
There's been inflation in the money supply
that has gone into inflation of financial assets.
It's gone into lining new debt.
It's gone into inflating the value of stock,
because it's been an artificial source of money that's
been used not just for stock buybacks,
because that's kind of a one-to-one relationship.
But all along the way, it's been there
as a sort of security blanket for banks
to be able to leverage more companies, or leveraging more.
Right now, actually, on average, companies in the S&P
are leveraged more than they were
before the financial crisis.
So there's inflation, but it's not inflation of real prices.
Where it had been for a while, for example, in Mexico
where they were reducing rates, it was inflating real prices,
because the relationship of that central bank
and that monetary policy was more closely connected
to the real economy.
And the fact that we don't have inflation in these countries--
because we don't, officially, but we have inflation
in financial assets-- is a sign of how just sort
of off the rails this has gone.
AUDIENCE: And my second question, quickly.
But also, we used to have the gold standard, which
would basically be something we could
peg the actual value of the dollar to.
Today, we don't have that.
But we also have petro dollars, which
are representing an asset or resource that can be traded.
Is that also why the dollar is so strong,
and we haven't lost the value of the dollar in the market?
Or is that completely unrelated to--
NOMI PRINS: It's not entirely unrelated.
The concept of the gold standard was something or has been
something-- not returning to it exactly as it was
pre-'71, but returning to some sort of component of gold--
say, in the Special Drawing Rights basket.
So you have your five currencies, and you have gold.
And there's sort of an average.
So you have something that's a real asset or some sort
of manner of bringing back a version of the gold standard
But for example, when the Chinese central bank
was criticizing this Fed policy of just inflating
a sort of currency, but not having anything real behind it
to back it, Ben Bernanke actually
went on the defensive--
and I have this in different parts of the book,
throughout the years-- and started
talking about how we don't want a gold standard.
Like, it wasn't even brought up as a topic when
he started defending it, or just throwing it away
as a potential.
And one of the reasons for that is you can't create gold.
This is not to say that we should be on a full gold
standard, or that it's actually a practical development.
But having gold as a portion of a currency basket
makes some sense because it's just an anchor.
It's just something that's actually physically there.
And it doesn't retain the same kind of value
the more there's other currencies
and there's more speculation in the market
than it might have if everything was going off
of real trade and real hard asset.
But it had an anchor level to it.
And the fact that it isn't a part of the main system,
but it is something that gets bought up
by some of the countries, the emerging countries, that
are trying to trade with each other their own currencies,
as well as to try to have more of a portion of gold reserves
in the potential that they create some sort of standard
amongst themselves, or something outside of the dollar, outside
of the euro, is certainly something
that has been re-initiated in this whole process.
Where that goes and how long it takes to get there,
I don't know.
I mean, there's people out there that
say the dollar's going to deflate tomorrow
and gold's going to go sky-high.
I think there's a trend to gold being considered as something
that should anchor this.
But in other countries using their currencies and trading
with each other, like China and Russia, like Europe and Japan,
there's a lot of trade agreements that have been
developed-- and I have a lot of them in "Collusion"--
but that have been developed in these years amongst countries
to try and offset some of the potential risk of, really,
not simply the dollar geopolitically, but really
the policy of bolstering a system that's
not really restructured and that has the potential
to bring down an economy, or multiple economies again.
One alternative that comes up in questions
is cryptocurrencies, and for similar reasons.
And what's interesting is that though there's
a lot of volatility in Bitcoin and other currencies--
and there's a lot of risk in being involved in them.
There's speculating in them, which
has its own risk attached.
But actually, if you're going to use them on a regular basis,
that kind of volatility could ruin anyone's business
on any given day, or pop it up.
And that's not the kind of volatility,
in the real economy, that most people can or should handle.
But the idea of having alternatives, any alternatives
to this system is very much an accelerated concept
because of how it's been handled, because nothing has
really been reformed or fixed.
It's just been plastered over by this artificial part
of the system.
So the head of the IMF, Christine Lagarde, who--
again, IMF, the International Monetary Fund, very much
a part of the system, very much involved
in the whole dollar-European currency system
from when it was created in the wake of World War II.
And it was created to basically subsidize
countries that were allies of the US and Europe.
I mean, this is kind of part of the point.
She currently has been on multiple public arenas
talking about alternative currencies,
and how cryptocurrency is something that is happening,
and it's expanding, and they need to be aware of it.
There are full SWAT teams at the Federal Reserve now
that are doing that, under the radar.
And you can get jobs at the European Central Bank
right now that are listed to be involved in developing
technology related to cryptocurrency analysis
and so forth right now.
So they're definitely all involved
from a different perspective.
But the idea of who actually ultimately gets
the regulation of it, versus the use of it, I think,
is still up for grabs.
Because if you had cryptos created
by the same central banks that are creating this currency,
then you don't necessarily gain autonomy from this system
by doing that.
But if there are cryptos that are regulated
by a portion of this so that they're not as volatile for end
users, then they actually might spread that much more quickly.
AUDIENCE: Just a follow-up question to that.
Just as a dabbler in cryptocurrency,
people always ask, but what is it based on?
And the answer is, well, not much,
but it does have a fixed supply.
I'm thinking of just the original Bitcoin,
like 21 million coins.
Well, gold is a fixed supply.
So when I look at those, I think--
one of the arguments is, well sure, Bitcoin is volatile.
But if nobody's on the gold standard,
it doesn't matter either.
It's kind of an odd, magical thing to me,
of how people decide to buy into agreeing to stick with a fixed
supply of anything.
When it comes to, I guess I would say, a gain this big,
what would be the motive?
Would it just be looking for something stable?
And what would bring this air balloon back down, I guess?
NOMI PRINS: Yeah, well, I think the idea--
and it's slightly different--
the language for crypto is similar to the language
And that's not an accident.
And the idea of having a fixed supply
as part of what pegs it to some form of anchor, right,
is not an accident either.
With respect to gold, it doesn't mean that you
can't have speculation in gold.
And if you had a gold standard, or a similar thing
to a gold standard, you could still have speculation.
You could still have stockpiles of gold.
You can still squeeze the market, et cetera.
But the idea of anything outside of the system
is that it is fixed.
And it does have a limitation.
And this process has been particularly unlimited.
I mean, it's still going up.
And so even though the Fed can talk
about tapering, or stopping to buy at this particular moment,
or creating money, creating dollars to basically continue
this process, the reality is, if things go south,
there's no limitation on--
let's just create another few trillion.
There was no limitation on literally any of the process.
And so talking about assets, hard assets
or cryptocurrencies, as a way to just infuse a limitation
to the system should, in theory, be
able to reduce the volatility of the system.
Now, on any given day, there's markets
moving for different reasons--
geopolitics, wars, trade wars, whatever.
But in terms of the overall backdrop of the system,
if you have something that's real, that's
there as a peg or even a proportion of all the currency
activity in the world, the idea is
that it should reduce the risk It's
like any portfolio in finance.
It's like if you have more--
the idea is, if you're diversified
you reduce the risk.
Now in practice, you have to watch what's going on.
But if you have a standard of some sort outside the system
that's limited, that should reduce the volatility,
ultimately, of the system.
And it should act as a counterbalance
to the unlimitedness of what these people are doing.
Because not only are they not limited in terms
of how much money or currency can be created,
they're not limited in terms of what
they have to show in terms of where it went,
or what happens if it goes away, or what happens if anything
gets really negative.
There's no real auditing going on.
There's no real checks and balances to any of this.
Whereas, an outside hard asset could be a check and balance.
AUDIENCE: [INAUDIBLE] add it to the pool of currencies
that the-- what is it-- the IMF uses?
NOMI PRINS: Yes.
AUDIENCE: Does that have that same kind of effect
of stabilizing the volatility?
And what effect does that have for China?
Is it a good thing for them?
Or is it problematic if a bunch of their currency
gets created to deal with some financial crisis?
NOMI PRINS: Right.
It's a good question.
It hasn't had, yet, the kind of effect--
in terms of the percentage of trade
that is done in Chinese currency at this particular moment,
relative to the percentage they have of the basket--
is still low.
So they basically came into this basket
between the UK pound, the Japanese yen, and then
the euro and the dollar.
So they kind of came in between third and fourth place.
So Japan and China kind of have a--
they mix and match what place they're in,
in terms of third and fourth.
But they came in pretty high.
But the actual trade that goes on internationally
in the Chinese ren still remains pretty low,
just because it takes time to catch up.
So they came in high because of the size of their economy.
But in terms of the actual trade that's going on,
that number is still small, but going up.
And the reason for that is they are
very active in creating trade partnerships and currency
relationships that involve the ren.
And in fact, the US banks have opened--
just in the last few months some of the major banks,
like JPMorgan Chase and stuff, have
opened clearing banks, or banks that can actually
take Chinese currency for the purpose of getting involved
in the Chinese market.
So I think that's going to grow.
The second part of your question again?
NOMI PRINS: Yeah.
AUDIENCE: Like what purpose--
NOMI PRINS: Right.
AUDIENCE: --having their currency in this basket serves.
NOMI PRINS: It gives them a political seat
at the table, too, and geopolitical seat at the table.
One of the reasons they wanted to match their status
in the ladder of the world and the entities that run things
from a monetary standpoint is because it
helps their economic superpower status.
It helps their relationships with other countries
in their region and throughout the world.
And so that's one of the reasons it's beneficial to them.
It's sort of like, look, if this is the basket that's
representing the world, and we're actually
bigger than several of these economies, then
why shouldn't we be in it?
Because once we're in it, then we
can utilize that to develop our presence elsewhere.
And what they've done with some of the money
that they've been fabricating as well is they've used it
specifically for that purpose-- of having better relationships
and alliances with countries, saying,
you give us your workers, and we'll build this bridge
and we'll finance it.
And so a lot of the money that they've created
has actually gone outside of China,
but for development projects.
And that's their way-- that's their strategy of developing
a long-term economic presence and a superpower presence,
like the beginning video there, I'm
in Colombo, Sri Lanka in the first scene of that video.
And in the middle of Colombo, there's a huge tower.
And it's reminiscent of the Shanghai
Tower, which is like the second-tallest building
in the world.
And it was like a mini-version.
And when you go around, even when you're studying this,
you're not following every real estate development
in the world.
And so I'm in the middle of Colombo.
I'm like, golly, that looks a lot like the Shanghai Tower.
That's kind of cool.
And of course, it turns out that the Chinese funded it.
They had their engineers come over and do it.
It was a joint effort, also, with people in Sri Lanka.
But basically, that's how the presence develops.
It's like the boots on the ground-- military.
It's like structures on the ground.
AUDIENCE: So I guess I'm still trying
to wrap my head around all this, right, and still trying
to better understand the check and balance.
So my understanding is, when we're
looking at this, the reason why we haven't seen any crash
or fall is because all of the players
are recognizing each other's currencies, right?
They're recognizing that they're printing.
They're playing along.
And is this crash that could possibly happen--
does that happen when someone says,
no, we don't recognize the money that you've been printing?
Or the money that you've been trading back and forth
is not admissible anymore.
We're not going to take it.
And is that when everything crashes?
Because otherwise, it's just based on--
NOMI PRINS: Of what stops it.
AUDIENCE: --the strength of an economy.
NOMI PRINS: Right, and what stops it.
And that's the odd thing that's been happening over the last 10
All of this started out as an emergency policy 10 years ago.
And obviously, the fact that it still exists
is an indication that whatever caused that emergency
hasn't really been fixed.
And if you pull the plug, yes, it will be a problem.
So whether you pull the plug on working
with someone else's currency, which
these banks can't really--
they trade in each other's currency.
They own each other's currency.
They hold bonds in each other's currency-- particularly
the holding of the dollar, because we
have the most amount of debt relative
to the rest of their nations.
And so the problem is, if they stop,
that's one way the system could collapse.
If they stop because they don't trust each other,
it's because this happens.
Again, it's because you all of a sudden
have a bunch of banks going under or having
a real crisis of some sort that's related to a derivative.
It's related to derivatives that are now partly created
from corporate bonds, that used to be mortgage bonds.
And those corporate bonds start to default,
so those derivatives start to go under.
And the whole chain starts to happen again.
And they're like, well, wait a minute.
We really need to accelerate or move away from these currencies
or from each other.
That is how these crises happen.
It's not like this definitive statement.
Like Europe can't say, we're never going to use the dollar.
Like, it's just not going to happen.
But what they can do is they can develop relationships
outside of the dollar so that, if something like this
happens again-- and the chances are
it will start in the United States again too,
because we have lent a lot of money to a lot of countries.
We've done all the complex structures.
We have more at risk.
And we're more codependent, in general, related to the world
than other countries are--
then you could have that fall start to happen.
So it's not like a decision--
we're not going to trust your currency.
It's more like, we're not going to trust the way
you deal with your system.
And what happened with the developing countries
in the wake of the financial crisis is there's--
and I talk about this in the book--
there's a lot more meetings.
There's a lot more conferences amongst themselves.
There's a lot more growth in trade agreements outside
of the US, and not necessarily using Japan.
And there's ones where Japan is using Europe.
There's just a lot of realignments going on.
And that's a way to say not so much we won't use the dollar,
we won't use your currency, but we
are cognizant that this is still on kind of shaky ground.
And so the next time there is a financial crisis,
hopefully, we have a little bit more protection,
sort of alternatives.
Which may or may not-- it depends what happens.
It depends how big that is.
I mean, no one really expected the market
to be cut by, like, 45% in 2008 from where
it was the year before.
I mean, that wasn't an expectation.
And even now, when I say this stuff,
like that the market's going to potentially crash,
we're up at these like heady heights,
most people don't feel the same way.
But it could still happen.
AUDIENCE: Like a continuation-- maybe
this is an obvious question.
But then couldn't everyone just hit the reset button
and then build each other back up again?
NOMI PRINS: Well, one of the solutions or possible paths
that I talk about in the last chapter
is this idea of canceling out each other's debt
and doing it in such a way that the countries that would be
most burdened by a collapse--
that were most burdened by a collapse
that they did not cause in 2008--
could be in a more stable situation.
What's happened with all of this is
that the countries that were most
at the center of the last financial crisis
and have the ability to do more harm financially
are the ones that got the most subsidies.
And so that just created more inherent risk.
And again, this could go on for a long time.
But it created more inherent risk.
So that's one of the things that could also happen.
AUDIENCE: So the word "collusion," to me anyway,
has a negative connotation.
Is it fair to characterize this collusion, in your view,
as something sinister?
Or do these people responsible for these systems think
they're acting in a very honorable way
by saving the economy or whatever?
NOMI PRINS: Well, it's weird, because I think most of them
believe that what they're doing is ultimately going to help
the economy, even though the evidence is that it hasn't.
The evidence is that wage growth hasn't really increased.
Stock growth has increased, so certain bonuses have increased,
but the evidence is that the economies that supposedly were
fixed are really sputtering.
And the economies that didn't receive
so much quantitative easing are either doing better,
or they're still caught up in what
might be the impact of what happens here.
So it's hard to say.
But I think what ultimately will happen,
though, is that at some point these people--
Some of them move out and some new people come in.
Mario Draghi, at some point, has to leave.
And probably-- or possibly, but probably whoever takes
his place will come, say, from Germany or from a country that
actually is against this policy and actually would
prefer that less artificial money is in the system.
And they have political reasons for that.
Their economy's doing better than some
of the other economies in Europe,
so this had other ramifications.
And so a shifting in the actual individuals
at the top of these institutions could
create a shift in the policy.
But also, there's a way to unwind this,
or at least to start to unwind, that actually
is using this off-the-rails solution in a good way.
For example, the Fed could take $1 trillion, or $2 trillion,
or whatever, of the $4.5 trillion
worth of money they created and assets
they received in return for doing that,
and create an infrastructure bank,
or create a development bank, or do something that's actually
really financing the real economy
and also moving forward.
When I was in China, I took the high-speed rail from Beijing
And I don't know if anyone has--
I mean, when you talk "high," it's really fast.
Like, you cannot see the countryside.
And it's quiet.
And I mean, it's excellent technology.
I mean, obviously, it costs what it costs,
but that's the kind of development,
that's the kind of infrastructure building--
developing the technology in conjunction
with the real parts of the economy
that real people actually work on-- that's
So you could actually take a lot of the money that's
been created, and rather than have it go into debt
and have it go into stock, actually have it diverted.
Nobody's going to be happy about that.
It might cause a correction.
But ultimately, it's a question of long term versus short term.
AUDIENCE: Thank you, so much.
NOMI PRINS: Yeah.
No, thank you.
Thank you, guys.